Comsat Corporation v. National Science , 190 F.3d 269 ( 1999 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
COMSAT CORPORATION,
Plaintiff-Appellee,
v.
NATIONAL SCIENCE FOUNDATION,
Defendant-Appellant,
No. 99-1348
and
NATIONAL SCIENCE FOUNDATION
DOCUMENT CUSTODIAN; ROBERT J.
DICKMAN; HUGH VAN HORN,
Defendants.
COMSAT CORPORATION,
Plaintiff-Appellee,
v.
NATIONAL SCIENCE FOUNDATION;
No. 99-1446
NATIONAL SCIENCE FOUNDATION
DOCUMENT CUSTODIAN; ROBERT J.
DICKMAN; HUGH VAN HORN,
Defendants-Appellants.
Appeals from the United States District Court
for the Eastern District of Virginia, at Alexandria.
James C. Cacheris, Senior District Judge.
(CA-98-108-MC)
Argued: June 8, 1999
Decided: August 23, 1999
5130 35 11 Before ERVIN, HAMILTON, and WILLIAMS, Circuit Judges.
Reversed by published opinion. Judge Ervin wrote the opinion, in
which Judge Hamilton and Judge Williams joined.
_________________________________________________________________
COUNSEL
ARGUED: William Barnett Schultz, Deputy Assistant Attorney Gen-
eral, Appellate Staff, Civil Division, UNITED STATES DEPART-
MENT OF JUSTICE, Washington, D.C., for Appellant. Peter
Buscemi, MORGAN, LEWIS & BOCKIUS, L.L.P., Washington,
D.C., for Appellee. ON BRIEF: David W. Ogden, Acting Assistant
Attorney General, Helen F. Fahey, United States Attorney, Arthur E.
Peabody, Assistant United States Attorney, John C. Hoyle, August E.
Flentje, Appellate Staff, Civil Division, UNITED STATES DEPART-
MENT OF JUSTICE, Washington, D.C.; Lawrence Rudolph, General
Counsel, Theodore Miles, Deputy General Counsel, Charisse Carney-
Nunes, Assistant General Counsel, NATIONAL SCIENCE FOUN-
DATION, Washington, D.C., for Appellant. Jacob B. Pankowski,
Brian O. Quinn, MORGAN, LEWIS & BOCKIUS, L.L.P., Washing-
ton, D.C., for Appellee.
_________________________________________________________________
OPINION
ERVIN, Circuit Judge:
The National Science Foundation ("NSF") appeals from an order
requiring the agency to comply with subpoenas issued by an arbitrator
during prehearing discovery. The subpoenas demanded that the
agency, which was not a party to the arbitration agreement, produce
documents and employee testimony related to a construction contract
between appellee COMSAT, Inc. ("COMSAT"), and an NSF
awardee. We reverse the district court's order and hold as follows: (1)
The Federal Arbitration Act, 9 U.S.C.A. §§ 1-307 (West 1999) (the
"FAA"), does not authorize an arbitrator to subpoena third parties dur-
ing prehearing discovery, absent a showing of special need or hard-
ship; (2) when the government is not a party to the underlying action,
an agency's refusal to comply with a subpoena must be reviewed
under the standards established for final agency actions by the
2
Administrative Procedure Act ("APA"), 5 U.S.C.A. §§ 702 - 8301
(West 1996 & Supp. 1999); and (3) NSF did not violate its own regu-
lations or the APA when the agency decided not to comply with the
subpoenas at issue in this case.
I.
Appellant NSF is the government agency charged with supporting
much of this nation's federally-funded basic science and engineering
research. See 42 U.S.C.A. § 1862(a) (West 1994). In accordance with
its congressional mandate, NSF awards grants and fellowships to
researchers and enters contractual or cooperative agreements with
research institutions.1 The agency does not engage directly in scien-
tific research. See 42 U.S.C.A. §§ 1862(a)-(c).
Associated Universities, Incorporated ("AUI") is a not-for-profit
corporation organized for the purpose of conducting scientific
research and education. In 1988 AUI entered a cooperative agreement
with NSF, by the terms of which AUI agreed to administer the
_________________________________________________________________
1 Section 6305 of the Federal Grant and Cooperative Agreement Act of
1977, 31 U.S.C.A. §§ 6301 - 6308 (West 1983 & Supp. 1999), explains
the nature and purpose of a cooperative agreement:
An executive agency shall use a cooperative agreement as the
legal instrument reflecting a relationship between the United
States Government and a ... recipient when --
(1) the principal purpose of the relationship is to transfer a
thing of value to State, local government, or other recipient
to carry out a public purpose of support or stimulation autho-
rized by a law of the United States instead of acquiring (by
purchase, lease, or barter) property or services for the direct
benefit or use of the United States Government; and
(2) substantial involvement is expected between the execu-
tive agency and the State, local government, or other recipi-
ent when carrying out the activity contemplated in the
agreement.
31 U.S.C.A. § 6305.
The statute distinguishes between "procurement contracts" and "coop-
erative agreements." See §§ 6303, 6305.
3
National Radio Astronomy Observatory, a network of research tele-
scopes. The cooperative agreement imposed no obligation upon NSF
or the government to fund AUI operations beyond the upper limits of
the award, which was provisional and subject to congressional appro-
priations. NSF retained the right to terminate the agreement due to a
lack of available funds or for other reasons. The agreement also speci-
fied that in the absence of written notice to the contrary from NSF's
Grants and Contracts Officer, "the Government shall not be obligated
to reimburse the Awardee for any costs in excess of the total amount
then allotted to the agreement."
On October 19, 1990, AUI entered into a contract with COMSAT2
to build a state-of-the art radio telescope in Green Bank, West Vir-
ginia (the "Green Bank telescope"), at a cost of $55 million. Some
years later, in October of 1997, a dispute arose between the parties
over AUI's liability for cost overruns. COMSAT claimed that various
acts and omissions by AUI, including after-the-fact changes to the
telescope specifications, entitled the contractor to $29 million in addi-
tional costs. The contract between AUI and COMSAT contained a
mandatory arbitration clause, and pursuant to the contract, the parties
submitted the claim to the American Arbitration Association for reso-
lution.
At COMSAT's request, on July 10, 1998, the arbitrator issued a
subpoena to NSF requiring the agency to produce all documents
related to the Green Bank telescope. NSF declined to comply with
this subpoena. The agency responded in writing to COMSAT's coun-
sel, justifying its decision not to comply with citations to NSF regula-
tions governing subpoenas.3 See 45 C.F.R. § 615.5. By way of further
_________________________________________________________________
2 COMSAT's predecessor corporation, Radiation Systems, Inc., was
the original party to this agreement.
3 Pursuant to 5 U.S.C.A. § 301, executive branch agencies may pre-
scribe regulations for their own internal governance, conduct of business,
record keeping, and document custody. Such regulations are commonly
known as "housekeeping" regulations, and do not authorize the agency
to withhold information from the public. Housekeeping regulations that
create agency procedures for responding to subpoenas are often termed
"Touhy regulations," in reference to the Supreme Court's decision in
United States ex rel. Touhy v. Ragen, 340 U.S. 462 (1951). In Touhy the
Court ruled that agency employees may not be held in contempt for
refusing to answer a subpoena, if prohibited from responding by a supe-
rior. See id. at 468.
4
explanation, NSF noted in this letter that COMSAT had already
sought substantially the same documents with an August, 1997 Free-
dom of Information Act ("FOIA") request. See 5 U.S.C.A. § 552(a)
(West 1996 & Supp. 1999). NSF had suspended its efforts to comply
with that voluminous request because COMSAT had been delinquent
in paying the associated photocopying charges.4
On August 20, 1998, COMSAT moved the arbitrator to issue the
three subpoenas that are the subject of this litigation. One of these
subpoenas required the NSF's "Document Custodian" to appear and
to produce "[a]ll documents relating to the Green Bank Telescope
project."5 The two additional subpoenas ordered NSF employees Rob-
ert Dickman, a liaison to AUI for the telescope program, and Hugh
Van Horn, Dickman's supervisor and a former member of the AUI
board of trustees, to appear and produce all documents in their posses-
sion related to the telescope project. The subpoenas were issued
returnable to COMSAT's counsel.
NSF responded on August 25, 1998, with a letter to COMSAT
indicating that the agency's prior decision not to produce documents
was a final agency decision. This letter also described the agency's
analysis of the relevant considerations under its housekeeping or
"Touhy" regulations.
Pursuant to NSF's Touhy regulations, when responding to a sub-
poena in a legal proceeding to which the NSF is not a party, NSF's
General Counsel must consider the following:
(1) Whether allowing testimony and document production
would serve the stated purposes of the regulation
_________________________________________________________________
4 NSF states that it identified over 40 linear feet of files that might con-
tain documents responsive to COMSAT's initial FOIA request, and that
processing such a request would cost more than $20,000. When so
informed, COMSAT agreed to narrow its request, and NSF continued to
produce responsive documents until June of 1998.
5 In its brief COMSAT states that its subpoenas sought only a "small
set" of documents not already produced by NSF or AUI. As worded,
however, the subpoenas plainly seek "all documents" in NSF's posses-
sion that are in any way related to the telescope project.
5
(these are promoting efficient NSF operations, avoid-
ing the involvement of NSF in tangential and contro-
versial issues, maintaining NSF impartiality in relation
to private litigants, and protecting sensitive, confiden-
tial information and the agency's deliberative process);
(2) Whether allowing testimony or document production is
necessary to prevent a miscarriage of justice;
(3) Whether NSF has an interest in the decision that will
be rendered in the legal proceeding; and
(4) Whether compliance with the subpoena is in the best
interests of NSF and the United States.
See 45 C.F.R. § 615.5(b).
NSF's General Counsel concluded in his written response to COM-
SAT that NSF would not produce the subpoenaed documents. The
Counsel's Touhy analysis reached these conclusions:
(1) Production of the documents would be uneconomical,
as the demand is substantially duplicative of COM-
SAT's earlier FOIA request;
(2) Production would be unnecessarily burdensome
because many of the documents originated from AUI
and may be discovered from that organization;
(3) NSF has no indemnity or joint defense agreement with
AUI, so production would not further the goal of main-
taining NSF's neutrality as a third party;
(4) Because the documents are available via FOIA or
through AUI, compliance is unnecessary to prevent a
miscarriage of justice; thus,
(5) The balance of NSF's and the public's interests favor
non-compliance.
6
In this same August 25, 1998, letter to COMSAT's counsel, NSF
requested further clarification of COMSAT's justification for seeking
to depose Van Horn and Dickman. COMSAT responded with the
explanation that these NSF employees had discussed the Green Banks
project with AUI officials. NSF responded in turn with a request for
additional clarification from COMSAT, and in a September 28, 1998,
letter the agency indicated that it had not reached a final decision with
respect to the deposition subpoenas. COMSAT then petitioned the
federal district court to compel NSF's compliance.
On December 4, 1998, NSF and COMSAT argued the motion to
compel before a magistrate judge. COMSAT insisted that by naming
NSF in the caption of its motion, it had made the agency a party to
the underlying dispute and thereby subjected it to the requirements of
Federal Rule of Civil Procedure 45 governing responses to a sub-
poena. See Fed. R. Civ. P. 45. The magistrate judge accepted this
argument and ruled from the bench that NSF could not assert sover-
eign immunity as a defense to enforcement of the subpoenas.
The magistrate judge concluded further that NSF had waived its
right to object to the subpoenas because the agency had ignored its
own regulations, which state
[i]f a response to a demand is required before the General
Counsel has made the determination [whether to respond]
. . . the General Counsel shall provide the court or other
competent authority with a copy of this part, inform the
court or other competent authority that the demand is being
reviewed, and seek a stay of the demand pending a final
determination.
45 C.F.R. § 615.6(c). The magistrate judge then entered an order
requiring NSF to comply with the COMSAT subpoenas.
NSF immediately appealed this order to the district court. On Janu-
ary 8, 1999, the parties appeared for a hearing at which the NSF
argued that the court should reject the magistrate's finding of waiver
because the agency had effectively lodged a Rule 45 objection
through its letters to COMSAT. NSF also argued that the FAA does
not grant an arbitrator the authority to subpoena third parties for pre-
7
arbitration discovery; that the agency's actions must be reviewed
under the standards of the APA; and that, at least with respect to the
deposition subpoenas, jurisdiction was lacking because the agency
had not reached a final decision regarding compliance.6
The district court read the FAA as a broad grant of full subpoena
power to arbitrators. The court reviewed NSF's refusal to comply
with the arbitration subpoenas under the standards of the Federal
Rules of Civil Procedure. Because the NSF did not seek judicial relief
before the return date for the subpoenas, the court found that the
agency had violated its own Touhy regulations and thereby waived
any right to object or to seek a protective order. The court then
affirmed the ruling of the magistrate judge.
II.
The situs of the pending arbitration is Reston, Virginia; therefore
the district court for the Eastern District of Virginia properly assumed
jurisdiction pursuant to § 7 of the FAA. See 9 U.S.C.A. § 7 (West
1999). Our jurisdiction over an appeal from the court's order enforc-
ing the subpoenas arises from 28 U.S.C.A. § 1291 (West 1993).
At the outset, we note that although our review of the district
court's legal conclusions is de novo, see Burgin v. Office of Personnel
Management, 120 F.3d 494, 497 (4th Cir. 1997), our review of NSF's
refusal to comply with the subpoenas is governed by the Administra-
tive Procedure Act ("APA"). See 5 U.S.C.A. §§ 702, 704, 706 (West
1996). When the government is not a party, the APA provides the sole
avenue for review of an agency's refusal to permit its employees to
comply with subpoenas. See Smith v. Cromer, 159 F.3d 875, 881 (4th
Cir. 1998) ("Cromer's remedy, if any, for the Justice Department's
[refusal to permit its employees to testify] may be found in the [APA]
. . . . ").
_________________________________________________________________
6 NSF also argued that the COMSAT subpoenas, which lacked instruc-
tions on how to challenge a subpoena, were facially defective when
judged by the standards of Rule 45. Because we reverse on other
grounds, we do not reach the issue of alleged defects in the subpoenas.
8
The APA waives the government's sovereign immunity from suit
and permits federal court review of final agency actions, when the
relief sought is other than money damages and the plaintiff has stated
a claim "that an agency or an officer or employee thereof acted or
failed to act in an official capacity . . . ." 5 U.S.C.A. § 702. As the
Supreme Court has instructed, an agency action may be considered
"final" only when the action signals the consummation of an agency's
decisionmaking process and gives rise to legal rights or conse-
quences. See Bennett v. Spear, 520 U.S. 154, 177-78 (1997). A
reviewing court may set aside a final agency action when the action
is arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with the law. See 5 U.S.C. § 706.
Additionally, we preface our analysis with the observation that,
despite COMSAT's attempts to characterize NSF as a party-in-
interest in the arbitration proceeding, NSF was not a party to the
Green Bank telescope contract and is not liable to pay any judgment
that the arbitrator might award.7 Moreover, the arbitration hearing had
not yet commenced when the subpoenas issued. Thus, this case tests
the scope of an arbitrator's authority, pursuant to the FAA, to sub-
poena witnesses and documents from a third-party federal agency for
the purpose of pre-hearing discovery.
A.
Before we assert subject matter jurisdiction in this case we must
decide whether any of NSF's responses to the subpoenas were "final"
agency actions. See 5 U.S.C.A. § 704 (limiting review to "[a]gency
action made reviewable by statute and final agency action . . .").
Prior to the return date for the document subpoenas, NSF's general
_________________________________________________________________
7 COMSAT cites the minutes of the meeting of the board of AUI trust-
ees for the company's claim that NSF is obligated to pay any arbitration
award. These minutes actually state that while litigation and award
expenses are an "allowable cost" under the cooperative agreement,
NSF's obligation to secure funding for these costs"is subject to the
requirement that the Director [of NSF], in his or her sole discretion, shall
determine the appropriateness of the reimbursement of the costs." See
Joint Appendix at 108.
9
counsel advised COMSAT in writing that the agency would not pro-
duce the materials demanded. This was a final agency action that is
ripe for our review under the APA.
Prior to the date scheduled for Van Horn and Dickman's deposi-
tions, NSF notified COMSAT's counsel that the agency required
additional information to decide whether to allow its employees to
comply with the subpoenas issued to them. NSF subsequently stated
in its brief to this Court that the agency has not reached a final deci-
sion as to whether to permit its employees to comply with the deposi-
tion subpoenas. Yet during oral argument NSF's counsel appeared to
concede that the agency had in fact reached a final decision not to
permit its employees to testify. Counsel then invited this Court to
review that decision.
Ordinarily we would consider whether the decision as it was
announced by counsel at oral argument was sufficiently "final" to per-
mit review, before we would proceed to address the merits of the
agency's action. Further analysis of this issue is unnecessary, how-
ever. We may assume without deciding that NSF reached a final deci-
sion not to comply with the deposition subpoenas because our holding
turns, not on finality or lack thereof in this particular agency action,
but rather on the scope of an arbitrator's subpoena power under the
FAA.
B.
The subpoena powers of an arbitrator are limited to those created
by the express provisions of the FAA. The statute provides, in perti-
nent part:
arbitrators . . . may summon in writing any person to attend
before them or any of them as a witness and in a proper case
to bring with him or them any book, record, document, or
paper which may be deemed material . . . .
9 U.S.C.A. § 7.
Nowhere does the FAA grant an arbitrator the authority to order
non-parties to appear at depositions, or the authority to demand that
10
non-parties provide the litigating parties with documents during pre-
hearing discovery. By its own terms, the FAA's subpoena authority
is defined as the power of the arbitration panel to compel non-parties
to appear "before them;" that is, to compel testimony by non-parties
at the arbitration hearing. See id.
In disregard of the plain language of the statute, COMSAT cites a
provision of the FAA that permits a federal district court to enforce
an arbitrator's subpoena, see 9 U.S.C.A.§ 7, seemingly for the propo-
sition that an arbitrator's subpoena authority is coextensive with that
of a federal court. This is decidedly not the case. The FAA provides
that a federal court may "compel the attendance of [a subpoenaed per-
son] before said arbitrator . . . ." 9 U.S.C.A. § 7 (emphasis added).
The enforcement provision does not expand the arbitrator's subpoena
authority, which remains simply the power to compel non-parties to
appear before the arbitration tribunal.
Furthermore, once subpoenaed by an arbitrator the recipient is
under no obligation to move to quash the subpoena. By failing to do
so, the recipient does not waive the right to challenge the subpoena
on the merits if faced with a petition to compel. 8 The FAA imposes
no requirement that a subpoenaed party file a petition to quash or oth-
erwise challenge the subpoena; the Act's only mechanism for obtain-
_________________________________________________________________
8 The district court found that NSF waived its right to object to the sub-
poenas because the agency did not act pursuant to 45 C.F.R. § 615.6(c),
which requires NSF to notify the court "or other competent authority"
that a subpoena is being reviewed and to seek a stay pending a final
agency determination. Id. NSF argues that COMSAT requested that such
notice be given to COMSAT's counsel, not the arbitrator, and the agency
acted accordingly.
We need not settle this procedural squabble. NSF's compliance with
its own Touhy regulations, which protect its employees from contempt
proceedings, has no bearing on the agency's right to object to the arbitra-
tor's subpoena. See § 615.1(d) (stating that these regulations "may not be
relied upon to create any right or benefit, substantive or procedural,
enforceable at law by a party against the United States"). See also Smith,
159 F.3d at 880 (holding that the Justice Department's Touhy regulations
are intended for internal governance only and do not create any right to
disclosure of agency records).
11
ing federal court review is the petition to compel. See 9 U.S.C.A. § 7
("[U]pon petition the . . . district court . . . may compel the attendance
of such person.").
The rationale for constraining an arbitrator's subpoena power is
clear. Parties to a private arbitration agreement forego certain proce-
dural rights attendant to formal litigation in return for a more efficient
and cost-effective resolution of their disputes. See Burton v. Bush,
614 F.2d 389, 390-91 (4th Cir. 1980) ("When contracting parties stip-
ulate that disputes will be submitted to arbitration, they relinquish the
right to certain procedural niceties which are normally associated with
a formal trial."). A hallmark of arbitration-- and a necessary precur-
sor to its efficient operation -- is a limited discovery process. See id.
at 391 (concluding that limitations on discovery promote the "policy
underpinnings of arbitration [which are] speed, efficiency, and reduc-
tion of litigation expenses."). Consequently, because COMSAT and
AUI have elected to enter arbitration, neither may reasonably expect
to obtain full-blown discovery from the other or from third parties.
Yet COMSAT argues quite persuasively that in a complex case
such as this one, the much-lauded efficiency of arbitration will be
degraded if the parties are unable to review and digest relevant evi-
dence prior to the arbitration hearing. For this reason, in Burton we
contemplated that a party might, under unusual circumstances, peti-
tion the district court to compel pre-arbitration discovery upon a
showing of special need or hardship. 614 F.2d at 391.
We do not now attempt to define "special need," except to observe
that at a minimum, a party must demonstrate that the information it
seeks is otherwise unavailable. COMSAT did not attempt to make
such a showing before the district court, and we infer from the record
that no such showing would be possible. As COMSAT acknowl-
edged, many if not all of the documents it sought were obtainable
from AUI or with a FOIA request. In fact, the record indicates that
prior to filing its petition to compel, COMSAT obtained hundreds of
responsive documents from NSF via the FOIA process, continuing up
to the point when COMSAT abandoned its FOIA request by ceasing
to pay photocopying charges. Likewise, COMSAT has not attempted
to show that any information it might obtain from Van Horn and
12
Dickman, both employees of non-party NSF, is otherwise unavailable
from opposing party AUI.
C.
Assuming arguendo that COMSAT could yet make the requisite
showing of special need, we examine whether the NSF's refusal to
comply with the COMSAT subpoenas was an arbitrary and capricious
agency action taken in violation of the APA. We apply the APA's
deferential standard of review in full recognition of the fact that one
of our sister circuits has decided otherwise. In Exxon Shipping Co. v.
U.S. Dept. of Interior the Ninth Circuit held that non-party federal
agencies must produce evidence in response to the subpoenas of pri-
vate litigants, subject only to the court's discretionary right to limit
burdensome discovery under Rules 26 and 45 of the Federal Rules of
Civil Procedure. 34 F.3d 774, 778-779 (9th Cir. 1994). We decline to
follow this holding.
1.
COMSAT does not contest the underlying validity of NSF's Touhy
regulations. Instead, COMSAT maintains that such housekeeping reg-
ulations do not "immunize" an agency from the duty to comply with
a federal subpoena. We agree, but only in the following respect: it is
sovereign immunity, not housekeeping regulations, that gives rise to
the Government's power to refuse compliance with a subpoena. As
we have acknowledged, "subpoena proceedings fall within the protec-
tion of sovereign immunity even though they are technically against
the federal employee and not against the sovereign," Boron Oil Co.
v. Downie, 873 F.2d 67, 71 (4th Cir. 1989); thus, in the context of an
agency's response to a third-party subpoena, "the proper method for
judicial review of the agency's final decision pursuant to its regula-
tions is through the Administrative Procedure Act." United States v.
Williams, 170 F.3d 431, 434 (4th Cir. 1999). The APA waives sover-
eign immunity and permits a federal court to order a non-party agency
to comply with a subpoena if the government has refused production
in an arbitrary, capricious, or otherwise unlawful manner. See id.
(holding that the APA is the only avenue of review for a state crimi-
nal defendant aggrieved by Justice Department's refusal, pursuant to
13
internal housekeeping regulations, to provide the defense with FBI
files).
The Ninth Circuit's Exxon decision abrogates the doctrine of sover-
eign immunity to a significant degree. Although the decision
acknowledges the APA as the source of the congressional waiver of
sovereign immunity permitting review of a non-party agency's refusal
to comply with a subpoena, see 34 F.3d at 779 n.9, Exxon overlooks
an important limitation upon this waiver: courts may reverse an agen-
cy's decision not to comply only when the agency has acted unrea-
sonably. See Fishermen's Dock Coop., Inc. v. Brown, 75 F.3d 164,
168 (4th Cir. 1996) ("[C]ourt of appeals review looks to the agency's
action to determine whether the record reveals that a rational basis
existed for its decision") (citation omitted).
2.
Acting in accordance with the procedures mandated by its regula-
tions, NSF reached an entirely reasonable decision to refuse compli-
ance with COMSAT's document subpoenas. In an August 25, 1998,
letter to COMSAT, NSF's general counsel described in detail the
agency's Touhy analysis of the costs and benefits associated with pro-
ducing the subpoenaed documents. Most if not all the documents
sought were available through COMSAT's FOIA request or from
AUI; therefore NSF's counsel concluded that production would be
unnecessarily duplicative and costly. As an agency official must,
NSF's counsel also considered whether the public interest and the
agency's taxpayer-funded mission would be furthered by compliance.
NSF's counsel answered this question in the negative, and we can-
not quarrel with his conclusion. Compliance with the third-party sub-
poenas issued in this single case, where the litigant sought a
tremendous number of agency documents and demanded the presence
of agency employees at depositions, would measurably strain agency
resources and divert NSF personnel from their official duties. Multi-
ply the cost of compliance by the number of NSF grantees -- almost
twenty thousand -- who might become embroiled in similar disputes,
or by the limitless number of private litigants who might seek to draw
upon NSF's expertise, and the potential cumulative burden upon the
agency becomes alarmingly large.
14
When an agency is not a party to an action, its choice of whether
or not to comply with a third-party subpoena is essentially a policy
decision about the best use of the agency's resources. We find NSF's
decision reasonable in this case, and so we defer to the agency's judg-
ment, recognizing as we do that "federal judges-- who have no con-
stituency -- have a duty to respect legitimate policy choices made by
those who do . . . [because] [o]ur Constitution vests such responsibili-
ties in the political branches." Chevron U.S.A. Inc. v. Natural
Resources Defense Council, Inc., 467 U.S. 837, 866 (1984) (citation
omitted).
The Ninth Circuit grounded its Exxon decision in a steadfast con-
viction that "the public . . . has a right to everyman's evidence." 34
F.3d at 779 (quoting United States v. Bryan, 339 U.S. 323, 331
(1950)). Our decision today does not call this important principle into
question. Private litigants who are dissatisfied with an agency's
response to a third-party subpoena or to a FOIA request may still
obtain federal court review under the APA. See Williams, 170 F.3d
at 434 (in an APA action, federal court may compel agency to pro-
duce information unlawfully withheld or unreasonably delayed).
Of course, neither FOIA nor a third-party subpoena will provide
the private litigant with guaranteed access, at public expense, to the
testimonial evidence of agency employees. When the government is
not a party, the decision to permit employee testimony is committed
to the agency's discretion. This compromise between public and pri-
vate interests is necessary to conserve agency resources and to pre-
vent the agency from becoming embroiled in private litigation. See
Distaff, Inc. v. Springfield Contracting Corp., 984 F.2d 108, 112 n.2
(4th Cir. 1993).
III.
In summary, we hold today that a federal court may not compel a
third party to comply with an arbitrator's subpoena for prehearing dis-
covery, absent a showing of special need or hardship. Moreover, if the
non-party recipient of a subpoena is a government agency, principles
of sovereign immunity apply. The decision whether to provide docu-
ments or employee testimony in response to a third-party subpoena is
committed to agency discretion. Accordingly, we review the govern-
15
ment's refusal to comply with such a subpoena under the APA's "ar-
bitrary and capricious" standard for final agency actions.
The district court erred in enforcing the arbitrator's subpoenas. The
court also erred when it reviewed NSF's actions under the standards
of Federal Rule of Civil Procedure 45, rather than the standard estab-
lished by the APA. The order enforcing the subpoenas is, therefore,
REVERSED.
16